When you die, your Roth IRA goes to whoever you named on the beneficiary designation form filed with the account’s custodian, and what that person can do with it depends on their relationship to you. A surviving spouse has the most options, including rolling the money into their own Roth IRA. Almost every other individual heir has to empty the account within ten years. Withdrawals are usually federal-income-tax-free, but the account’s age at your death and the choices your heirs make can change that.
The Beneficiary Form Controls, Not the Will
The beneficiary designation on file with the financial custodian decides who inherits the Roth IRA. That form outranks a will or a living trust. If your will leaves the account to a sibling but the designation form names a child, the child gets the money. Primary beneficiaries have the first claim; contingent beneficiaries receive funds only if no primary beneficiary survives you.
If no valid designation exists, the Roth IRA typically defaults to your estate. That pulls the account into probate and shortens the payout timeline. Under federal distribution rules in 26 U.S.C. § 401(a)(9), an estate that inherits a Roth IRA generally must empty the account within five years when the owner died before their required beginning date.1Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans2Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries Because Roth IRA owners are never required to take distributions during their lifetime, they are always treated as having died before that date.3Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
What a Surviving Spouse Can Do
A surviving spouse has the widest set of choices. The most powerful is the spousal rollover: moving the assets into the spouse’s own existing or new Roth IRA. Once rolled over, the funds are treated as if the surviving spouse had always owned them, and because original Roth IRA owners never face required minimum distributions during their lifetime, the balance can keep growing tax-free indefinitely.3Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
The other option is keeping the money in an inherited IRA instead of rolling it over. This works better when the surviving spouse is under 59½ and might need the money soon. Distributions from an inherited IRA are exempt from the 10% early withdrawal penalty regardless of the beneficiary’s age; the same withdrawal from a rolled-over Roth IRA could trigger that penalty on earnings taken before 59½.4Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions The tradeoff is less flexibility later. A spouse who doesn’t need early access almost always comes out ahead with the rollover.
The 10-Year Rule for Most Other Heirs
The SECURE Act, effective in 2020, ended the “stretch” strategy for most non-spouse beneficiaries. If you die and leave your Roth IRA to a child, grandchild, sibling, friend, or other individual who isn’t your spouse and isn’t in the narrow exception group below, that person must empty the entire inherited Roth IRA by December 31 of the tenth year after your death.5Internal Revenue Service. Retirement Topics – Beneficiary
Inherited Roth IRAs carry a meaningful advantage here over inherited traditional IRAs. Final IRS regulations effective in 2025 require some non-spouse beneficiaries of traditional IRAs to take annual distributions during the 10-year window. That requirement doesn’t apply to inherited Roth IRAs, because the original owner is always treated as having died before their required beginning date.3Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs So a non-spouse heir can leave an inherited Roth IRA untouched for the full ten years, let it grow tax-free, and pull everything out in year ten. No annual withdrawals are required.
Eligible Designated Beneficiaries
A small group of non-spouse heirs escapes the 10-year rule and can still take distributions over their own life expectancy. The IRS calls these “eligible designated beneficiaries,” and the category covers:
- Minor children of the account owner, biological or legally adopted, who are under age 21. When the child turns 21, the 10-year clock starts, giving them until 31 to fully deplete the account.
- Disabled or chronically ill individuals who meet the IRS criteria at the time of the owner’s death.
- Individuals not more than 10 years younger than the owner. A sibling close in age is the typical example.
The age-21 threshold for minor children is federal and applies regardless of a state’s own age of majority.5Internal Revenue Service. Retirement Topics – Beneficiary Grandchildren, nieces, nephews, and other minors who aren’t the account owner’s own children do not qualify. They fall under the standard 10-year rule.
When a Trust Is the Beneficiary
Some owners name a trust rather than an individual, usually to keep some control over how the money is spent after death. A trust beneficiary adds complexity. If the trust qualifies as a “see-through” trust, the IRS looks through it to the individual beneficiaries underneath, and the payout timeline follows the rules that would apply to those individuals.
To qualify, the trust must be valid under state law, must be irrevocable or become irrevocable at the owner’s death, must have identifiable beneficiaries under the trust document, and a copy must be provided to the IRA custodian by October 31 of the year following the owner’s death.
A trust that fails those tests is treated as having no designated beneficiary, and the account then falls under the five-year distribution rule.2Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries Naming a trust without meeting these requirements can accidentally compress the entire withdrawal timeline.
Are Withdrawals Tax-Free for Heirs
Distributions from an inherited Roth IRA are generally free of federal income tax. Contributions the original owner made always come out tax-free. Earnings come out tax-free too, as long as the account satisfies the five-year aging rule: the original owner must have made their first Roth IRA contribution at least five years before dying.5Internal Revenue Service. Retirement Topics – Beneficiary
If that five-year threshold hasn’t been met, the earnings portion of any withdrawal is taxed as ordinary income. Contributions still come out tax-free. The five-year clock starts on January 1 of the tax year for which the original owner made the first contribution, so an account opened in April 2023 for tax year 2022 satisfies the rule as of January 1, 2027. Heirs who don’t know when the account was opened should ask the custodian, which tracks the original contribution date.
Federal Estate Tax
Income tax is separate from estate tax. The full Roth IRA balance at the date of death counts toward the owner’s gross estate. For 2026, the federal estate tax exemption is roughly $15 million per individual under the extended provisions of the Tax Cuts and Jobs Act, and roughly $30 million for a married couple. Federal estate tax on a Roth IRA is a concern mainly for very high-net-worth estates.
State Taxes
Some states impose their own estate or inheritance taxes, and the exemptions can be much lower than the federal amount. Rates and thresholds vary. An heir living in a state with an inheritance tax may owe something even when the estate is well under the federal exemption. Checking the rules in the relevant state is worth the time.
Penalty for Missing a Deadline
Missing a required distribution from an inherited Roth IRA triggers an excise tax on the shortfall. The rate is 25% of the amount that should have been distributed but wasn’t.6Internal Revenue Service. Publication 590-B – Distributions from Individual Retirement Arrangements (IRAs) For an heir subject to the 10-year rule, the biggest risk is forgetting about the account and blowing past December 31 of year ten.
The penalty drops to 10% if the beneficiary corrects the shortfall inside the IRS correction window by taking the missed amount and filing an amended return. A full waiver can be requested by filing Form 5329 with a written explanation showing the miss was a reasonable error and is being fixed.7IRS.gov. Instructions for Form 5329 The IRS decides these case by case.
If the First Heir Dies With Money Still in the Account
If the first inherited Roth IRA beneficiary dies before finishing the payout, the account passes to whoever they named as a successor on the inherited IRA. What the successor faces depends on how the first beneficiary was taking money out.
If the first beneficiary was an eligible designated beneficiary taking life-expectancy distributions, the successor gets a fresh 10-year window measured from the eligible designated beneficiary’s death.5Internal Revenue Service. Retirement Topics – Beneficiary If the first beneficiary was already on the 10-year rule, the successor has to finish emptying the account within whatever time remains of that original window. The clock doesn’t reset. This matters most when the first beneficiary dies early in the 10-year period with a large balance still in the account.
How an Heir Claims the Account
Claiming the account starts with a few documents. Most custodians require a certified copy of the original owner’s death certificate, the heir’s Social Security number, and the account number of the Roth IRA being claimed.8Charles Schwab. Inherited IRA Application for Individual Beneficiaries Beneficiary claim forms are typically available on the custodian’s website or by phone.
On the form, the heir selects their beneficiary status (spouse, non-spouse, eligible designated beneficiary) and indicates how the assets should be handled: rollover, inherited IRA, or lump sum. The custodian opens a new inherited Roth IRA titled in the heir’s name, transfers the holdings, and issues a confirmation statement. From there, the account is the heir’s to manage within whichever distribution timeline applies.